Gold and Silver Encounter Pressure as Inflation Persists


Last week, gold snapped its three-week winning streak as rate cut doubt weighed on the yellow metal. This week, investors paid close attention to GDP data, Fed talking points, and inflation data. It was a shortened trading week as major markets in the U.S. were closed on Monday, in observance of the Memorial Day Holiday. 

On Tuesday, gold hovered near $2,355 while silver managed to breach $32. On the same day, investors digested a report from the Conference Board which showed that consumer confidence rose to 102 from 96 in May, marking the first uptick for that index in three months.

On Wednesday, stocks ebbed as Treasury yields spiked, and investor concern over inflation dampened the mood on Wall Street. On the same day, the Fed’s Beige Book was released which outlined Fed officials’ concern over a slowing economy and persistent inflation. This sentiment, along with dollar strength and rising yields, also weighed on precious metals as gold dipped 0.9% to a closing price of $2,335. 

On Thursday, U.S. GDP data revealed that the U.S. economy grew at a lackluster 1.3% yearly pace in the first quarter of 2024. The softer GDP data meant that U.S. stocks would extend losses from the previous session. Most notably, the Dow Jones Industrial Average notched its largest three-day decline in over six months. 

For some, the weaker-than-expected GDP data meant that the Fed would be more likely to cut interest rates in the face of a weakening economy. This sentiment was favorable for gold, as the yellow bounced from three-week lows, and would end Thursday’s trading near $2,345 an ounce. Meanwhile, investors braced for inflation data which was set to be released on Friday. 

This morning news broke that prices rose again in April, according to the Fed’s preferred inflation gauge, the PCE index. According to the PCE index, inflation rose 0.3% last month, which was in line with expectations. Given the fresh inflation data was in line with forecasts, the mood shifted on Wall Street. As a result, the Dow surged marking its best session of 2024. Despite today’s gains, the Down snapped a three-week winning streak with a 1.52% weekly decline. Meanwhile, the Nasdaq Composite ended the week with a 0.30% loss while the S&P 500 shed 0.08%.

 The uptick in inflation cast doubt on near term rate cuts and in turn, pressured gold to the downside. As a result, gold fell 0.7% today, to a closing price of $2,343 for little weekly change. In a similar move, silver shed 3% today, but is slightly higher for the week, at $30.41. 

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